InterDigital Inc (IDCC)

[blueskywaves]

I guess you would agree that our future cash position will not be dependent on the excercise of options if the company can execute on their stated expectations

I don't think a small growth company can ever have too much cash. For example, assuming all the 24-month prepayments come in and IDCC exits 2003 with $400M in cash/investments, IDCC will still have to burn through operating expenses (currently $80M a year) until the next round of optional 24-month prepyaments. Recurring cash royalties won't fully pay the opex bills for some time. Again, why would any shareholder want IDCC to conduct 3G negotiations with declining cash balances?

We want the cash balances to keep on going up so IDCC can get better 3G contracts. Think of the cash/invesment account as a margin of safety. The higher the margin of safety, the higher the market cap this company's fundamentals can support.

More importantly, until the accounting rules are changed, options remain this company's main advantage in the perennial recruitment war for top 5% managerial and technical talent. If IDCC is not competitive in this recruitment war, its ability to improve its patent portfolio will be limited and will most likely affect their ability to monetize their 3G patent portfolio fully.

The issue of dilution is a red herring raised by purists who don't seem to understand that there are acceptable levels of dilution for growth companies at different stages of their life cycle. The fact of the matter is that every technology company that has exceeded the $1B revenue milestone has had to dilute its stock to raise the funds to finance its growth.